07 Jul Selling Your Tech Company: How to Prepare for Successful M&A from Day One
It’s the dream of just about every budding tech entrepreneur: build the business, gain a loyal following, make a valuable brand, then cash out. But merely desiring this outcome doesn’t necessarily mean it will ever be a reality. Exit planning begins from the day you form your business. Indeed, the more work you put into exit planning now, the more likely it is that you’ll have several interested buyer when you’re ready to throw your hat into the competitive tech M&A ring. Here’s what you need to do from day one to ensure you’re ready when it’s time to make the exit leap.
Work With Trusted Advisors
Savvy leaders know that they can’t possibly know everything, so they keep their ego out of the business. You need to work with trusted mentors who can guide you through the process of growing your business. And then, when you begin moving toward an exit, work with an advisory team that knows the tech M&A market inside and out. No matter how good you are at running your company, tech M&A is a completely different beast that requires a lot of strategy and experience most entrepreneurs lack.
Know What Your Shareholders Want—and What You’re Obligated to Give them
You should have common interests with your shareholders, but they may not be perfectly aligned. Before proceeding with any exit strategy, you must vet it with an eye toward your shareholder obligation. Begin working with your board before the formal vote, then tweak the exit plan based on their feedback. By the time shareholders gain the chance to vote, they should all have had the opportunity to voice concerns and investigate your plan.
Explore All Options
Perhaps you have a specific plan in mind to make your exit dreams a reality. That doesn’t mean your plan is the best plan for your needs. Don’t get stuck in tunnel vision. Work with an advisory team to assess all options, the potential tax and revenue implications of each, and then assess which buyers are offering the best terms. The best option for your company at its birth might be very different 10 years down the road, so it’s important to continually revise and re-evaluate your exit plans.
Understand Valuation
For most owners, the real measure of how successful an exit is is how much money they leave the deal with. Many end up disappointed with their total payout, especially if they have not prepared well for the deal or entered it with unrealistic valuation expectations. You might believe that a steady revenue stream is enough, but it’s not. Investors are risk averse. They want to see a sustainable, salable business model and a strong strategic plan. The right advisory team can help you grow value, identify any weaknesses in your company, and ensure you walk away with the maximum possible payout. Don’t let your emotions determine your asking price; get expert insight.
